Economics

Industrial growth slows to three month low

The News

  • Industrial output growth faltered in August, dipping to a 3-month low.

 

Highlights of Index of industrial production

  • Data released by the Central Statistics Office (CSO) showed the index of industrial production rose an annual 4.3% in August, slower than previous month’s 6.5% and 4.8% posted in the same month last year.
  • The mining sector contracted 0.4% compared with a growth of 9.3% in August last year.
  • The manufacturing sector rose 4.6% during the month, shade higher than the year-ago period growth of 3.8%.
  • The capital goods sector, a barometer of industrial activity, rose 5% in August as against 7.3% in the same month last year.
  • Separate data released by CSO showed retail inflation rose an annual 3.8%, marginally higher than previous month’s 3.7% growth.
  • This is the second successive month when retail inflation has remained below the central bank’s inflation target.
  • Consumer inflation for September surprised at 3.8%, 20 basis points below RBI’s medium-term target for the second straight month.

 

Reasons for dip in the growth output

  • The industrial growth dipped, led by a combination of factors:
    • It includes an unfavourable base effect and disruption related to flooding in parts of the country.
    • It reflects the slowdown in growth of core sector and automobile production.

 

About Index of industrial products

  • The Index of Industrial Production (IIP) is an index which shows the growth rates in different industry groups of the economy in a stipulated period of time.
  • The IIP is a composite indicator that measures the changes in the volume of production of a basket of industrial products during a given period with respect to the volume of production in a chosen base period.
  • The data refers to the General Index as well as for each industry group.
  • The base year for the current series of IIP is 2011-12.
  • IIP is a composite indicator that measures the growth rate of industry groups classified under:
  • Broad sectors, namely, Mining, Manufacturing and Electricity.
    • Use-based sectors, namely Basic Goods, Capital Goods and Intermediate Goods.
  • The Eight Core Industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP).
  • These are Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.
  • The IIP index is computed and published by the Central Statistical Organisation (CSO) on a monthly basis.

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